What are the legal and other risks of buying a viatical settlement?
Investments in viaticals involve very significant risks that are often not disclosed. Significant concern has been expressed about advertising that has the potential to mislead both sellers and purchasers of viatical and other settlements.
Misleading advertising can contain false information or could encourage individuals to be involved in improper transactions. Examples such as “guaranteed rate of return,” “no risk” or references to a guarantee by a life insurance company or government entity have been used and probably constitute fraud.
Soliciting people to provide false or misleading information on a life insurance application or to purchase a policy with the intent to resell are criminal.
There are no national standards adopted to regulate information that is provided to potential investors. Some states have adopted—by legislation or regulation—minimum disclosure requirements to purchasers. Currently, there is no consensus among the insurance, securities or viatical industries as to who is qualified to offer viatical and similar settlements as investment options and what the appropriate disclosures should be.
A major concern is that viatical settlement contracts are not be suitable investments for some of the investors to whom they are being marketed.
As with any investment, the buyer or purchaser must invest wisely, considering such factors as; age, risk tolerance, financial situation, liquidity, investment objectives, investment time horizons and level of sophistication.
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